Employee Retention Challenges are the Result of Changing Labor Force Economics

by Doug Claffey

Why Employee Retention and Hiring Plans Matter Now More Than Ever, Part I

Organizations are benefiting from a stronger economy, and that’s good news overall. But leaders beware: you’re likely to face some daunting employee retention challenges in 2016—if you haven’t already. It’s time to make sure you are doing everything you can to keep great people, or risk watching them walk out the door.

Employee Retention

Employee retention more important than ever.

At WorkplaceDynamics, we study organizations that either qualify as Top Workplaces, or aspire to achieve that caliber. Our survey research shows an average of 37% of employees—more than one in three—considered pursuing a better job last year. That figure rose 1.5 percentage points over the previous year.

Companies that achieve Top Workplaces status have employee engagement levels more than double the norm in the United States. The benefits are reflected in employees who are motivated to give their personal best, stay put—and even recommend their organizations to others.

But it’s a different story for organizations with significantly lower engagement levels. Of the nearly 7,000 organizations we surveyed in 2015, we found that among the bottom 10% (which more closely reflect a typical U.S. workplace) more than half of employees admitted to seeking a new opportunity elsewhere:

“I have considered a better opportunity in the past month.”
Year Aspiring Top Workplaces

(Bottom 10%)

Top Workplaces

(Top 10%)

2013 56% 14%
2014 54% 12%
2015 57% 14%

Source: WorkplaceDynamics

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U.S. employees are voluntarily leaving their jobs at alarming rates

The tightening of the labor market is a big deal—and with consecutive months of hiring and wage growth, it’s only expected to accelerate. Employee retention is more important than ever.

  • The Wall Street Journal reports the rate employees are voluntarily leaving their jobs is the greatest since 2008.
  • The number of job seekers has fallen and others have simply checked out of the market altogether.

A shortage of skilled labor is a primary concern for executives

Companies are citing a skilled labor shortage as a mild (38%) or serious (42%) long-term challenge to their businesses, the MidAtlantic Employers’ Association (MEA) reports.  Nationwide, executives worry about this more than anything else. When the Employer Associations of America asked executives to express their greatest challenges for business growth in their industry, hiring the right labor topped the list:

  • 26% said the inability to find skilled labor
  • 19% said economic considerations
  • 17% said government regulations

 Lower unemployment rates present a hiring challenge

To maximize your organization’s output, you need to do one of two things: 1) make the workforce more productive, or 2) hire more people. Businesses have wrung out about as much productivity as they can and popular trends such as TQM, LeanSixSigma, and Supply Chain have been exhausted. That means companies are hiring faster than the labor supply, and with unemployment as low as 2% in some markets, this has proven to be a challenge.

So what does this mean to your organization?

Workplace culture and employee engagement are more important than ever before. Those who “got it” five years ago are well-prepared, while organizations without solid retention plans are probably in trouble. Stay tuned—next time I’ll discuss what you can do to improve employee retention, where you should focus your efforts for the greatest impact, and what really matters most to your employees.